Vladimir Lenin was one day asked about the ethics of a party member who was marrying an heiress. The party wasn’t a “finishing school”, Lenin said, but the money would come in handy, no matter how the lady in question, or her parents, acquired it. “A scoundrel,” Lenin recommended, “may be of use to us just because he is a scoundrel.”

This wasn’t the same thing as the adaptations attributed later to more than one US President regarding more than one foreign political leader. “He may be a sonofabitch (bastard, crook),” each of the presidents is reported to have said, “but he’s our sonofabitch (ditto).”
The difference between Lenin’s idea and the American one is too fine to be acknowledged by the US Government-funded programmes teaching democracy to Ukrainians. But it is evidently one of the guiding principles of the US democracy trainers. That’s because in the millions of dollars spent to date on Ukrainian democracy, almost nothing has been paid by the US to encourage Ukrainians to expose, challenge, or remove the Ukrainian oligarchs who control, still, the Ukrainian economy.

The US budget for Ukrainian democracy became a state secret at the start of this year. Before, congressional budget documents for the State Department, US Agency for International Development (USAID), and the National Endowment for Democracy (NED) indicate annual spending of about $100 million per year on Ukraine. Of this, about $10 million went on democracy training. About one-third of that was handed out to local Ukrainian organizations.

According to the 2012 NED report, $3,098,038 was awarded to these locals. Just one grant was made to help investigate and expose corruption. That was for $31,293, and the recipient was a Sumy regional organization called Bureau of Political Analysis. The purpose was “to promote transparency and accountability at the local government level in the Sumy, Poltava and Kharkiv regions of northeastern Ukraine. The Bureau will train 60 civic activists to expose corrupt practices in procurement procedures and scrutinize 80 active procurement documents.”

Until now, corruption in Ukraine has been a rallying issue for critics and opponents of the deposed president Victor Yanukovich, his cronies, and kin. In a March poll of voter sentiment, paid for by USAID and published by the International Republican Institute (IRI), the first priority identified by the Ukrainians for action by the government in Kiev was “anti-corruption”. This was expressed by 57% of western region respondents; by 53% in Kiev and the central regions; 40% in the south; and 47% in the east. Economic development and protection of pensions and social welfare were almost as important to southerners and easterners in this US poll. For more on the IRI poll, click.

Across the border, President Vladimir Putin has tried to tie the Ukrainian oligarchs to the corruption issue, and to the political choices now facing Ukrainian voters. According to Putin, the regime which replaced Yanukovich “appointed new governors – oligarchs and billionaires – to these regions. People are suspicious of oligarchs as it is. They believe that they earned their riches by exploiting people and embezzling public property, and these oligarchs have been appointed to head their regions. This only added to the public discontent. People chose their own leaders, but what did the new government do to them? They were thrown into prison….”

On Sunday (April 27) Yulia Tymoshenko (right) made the first attempt by a Ukrainian presidential runner to tie corruption in Ukraine to the oligarchs who have survived Yanukovich’s ouster. She intended this as an attack on the candidate most likely to defeat her, if the election takes place – Petro Poroshenko (right). She also tried to tie the oligarchs to the Kremlin. “Russia and the oligarchs,” Tymoshenko said, “ — it’s practically the same thing.”

“When in the middle of war a contract is awarded to one of the candidates for president — that’s Pyotr Poroshenko — in practice, to the Sevastopol repair plant by those people who today have occupied the country [Crimea], to the sum of 130 million dollars, it means in practice that we are passing to the format when this connection – Russian aggression [and] the Fifth Column of the oligarchs – become our weakness, our defeat.”

Tymoshenko was referring to the fact that Poroshenko owns Sevmorverf, a ship repair yard in Sevastopol, as reported here. There has also been a procurement award from the Russian Defense Ministry and Navy to a Crimean shipyard. Putin announced it during his April 17 television presentation, claiming “the Russian Defence Ministry has already placed an order worth 5 billion rubles [$139 million] with one of the shipyards.”

Tymoshenko’s connection of the two was a fabrication. A maritime industry source at Sevastopol explains that “four billion of the five has long been earmarked for the Thirteenth Ship Repair Plant [13-й судоремонтный завод]. This is not a shipbuilding yard. It is for ship repairs. [The Kremlin] has just added a billion, that’s all. Poroshenko’s plant used to build heavy floating cranes, a fine technical creation. But today it cannot do anything at all.”

Poroshenko’s yard has issued a categorical denial that it is on the receiving end of Russian Navy money.

Polling this month by the Kyiv International Institute for Sociology (KIIS) confirms that anti-oligarch feeling is a powerful vote-getter in the eastern and southern regions of the country. Support for nationalizing the oligarch assets is strongest in Donetsk region, where resistance to the Kiev government is currently strongest; and also where Rinat Akhmetov is the most powerful oligarch figure.

Professor Vladimir Paniotto, who heads KIIS, was asked whether there are comparable measurements of anti-oligarch views among Ukrainian voters in the central and western regions of the country. He said that a survey on this question is being prepared in that part of the country, and may be released within days. In the meantime, Paniotto said that public attitudes towards the Ukrainian oligarchs “has always been negative, but now it is increasing.”

The day before Tymoshenko spoke against the oligarchs on national television, Akhmetov hosted Mikhail Khodorkovsky and acting governor Sergei Taruta in Donetsk. Taruta is one of the oligarchs to whom Putin was referring. He is co-owner of the Industrial Union of Donbass, a steel and mining group, which has been on the receiving end of Russian state-bank financed share purchases, as reported here.

Khodorkovsky’s version of what he discussed and agreed with Akhmetov and Taruta was reported by the EuroMaidan website. “I won’t repeat the content of our conversation at the meeting. However, I will say one thing: the position of both men is clear: Donbass remains a part of Ukraine. Do they understand the situation? Yes, they understand it very well. Do they know what can be done? Yes, they understand what is possible and what is not possible. But without the support of civil society, their freedom of maneuver is extremely limited, or perhaps non-existent. Let’s be honest. Sending special forces from Kyiv is not a solution. And everybody understands this perfectly. If they don’t, they should think about it.”

Akhmetov (right) was asked to confirm he had met Khodorkovsky on Saturday, and to clarify on whose initiative the meeting had taken place. He was also asked to say what benefit he gained from their discussion. Through spokesmen at his SCM holding and in his personal office, he refused to respond.

So far the Obama Administration has been masking the role it believes Ukrainian oligarchs like Akhmetov should play in its programme for the country. In February Zbigniew Brzezinski, the Polish-American security advisor during Jimmy Carter presidency, proposed levying $10 billion from the Yanukovich family, and another $1 billion apiece from “the top 10 Ukrainian oligarchs ­– principal beneficiaries of the country’s stunningly widespread corruption – [to aid] their country’s financial rehabilitation.” The subsequent freeze of Yanukovich assets and Swiss prosecution to return them makes the first part possible. Nothing more has been heard of the levy from the surviving oligarchs.

The only Ukrainian oligarch to have established a Washington lobbying operation has been Victor Pinchuk, who has financed not only a professional lobbyist and pollster in New York, but also several think-tank advocates in Washington. This effort paid off in February, when the US International Trade Administration ruled that although Interpipe, Pinchuk’s pipemill at Dniepropetrovsk, had been selling steel pipes to the US below cost, the anti-dumping margin demanded by the US pipemakers of 26% to 31%, should be reduced to just 5.3%. At 2012 trade value, that’s a benefit worth about $130 million to Pinchuk’s annual revenues.

The one Ukrainian oligarch directly targeted by the US sanctions campaign is Dmitry Firtash (right). However, the US indictment against him focuses on bribes alleged to have paid in India in connection with titanium trades now eight years old. The other Ukrainians on the US and European sanctions lists issued in March were all political appointees of Yanukovich’s last government, or administrators in Crimea.

If there is a tacit hands-off policy in Washington, Berlin, and London towards the Ukrainian oligarchs, the policy towards Russian oligarchs is explicit. But this targeting singles out only those oligarch-sized figures in Moscow and St. Petersburg, whom the US claims to be close to Putin, personally as well as commercially. The targeting has been made according to an American theory of their influence over Putin, not of their involvement in the Ukrainian events. For the details of this operational code, click. For the full list of names in the US Treasury designations, click here for the March 20 list and click here for the April 28 list. The Treasury’s explanation for the designations can be read here.

The selectivity of the US designations is obvious. If these are Putin’s scoundrels, sonofabitches, bastards, and crooks, to whom do the much better known Russian scoundrels, sonofabitches, bastards and crooks belong? What has become of Roman Abramovich (top image, 2nd from right), whose personal closeness to Putin has been attested by more evidence than has appeared in the western press about Timchenko?

With the exceptions of Timchenko and Igor Sechin, the names on the US sanctions list are notable for their lack of oligarch command and control of Russia’s major economic enterprises and sectors; the evidence of US Government reports on those sectors shows it. According to the Wikileaks archive of State Department cables, the oligarch names are Vladimir Potanin, Alexei Mordashov, Mikhail Prokhorov, Victor Rashnikov, and Oleg Deripaska. More potent than the State Department’s files are the annual threat assessment reports of the Director of National Intelligence. These have identified “criminals and criminally linked oligarchs [who] enhance the ability of state or state-allied actors to undermine competition in gas, oil, aluminum, and precious metals markets.” Their names are implied: Sechin, Timchenko, Potanin, Prokhorov, Deripaska, and (until recently) Suleiman Kerimov. The only overlap between the current sanctions designations and the “criminally linked oligarchs”, according to the US Government documents, is Sechin and Timchenko.

The US government has explained why these two are targets. It has not explained why the others have been spared. Potanin was the first of the Russians to buy a major US asset; that was the Stillwater palladium mine in Colorado, which turned out to be a liability and was sold at the end of 2010.

If the US assets in the holdings of the other Russian oligarchs are counted, they are located in Washington state, Oregon, Texas, Colorado, Oklahoma, Iowa, Arkansas, Nebraska, West Virginia, Indiana, Michigan, Ohio, Pennsylvania, Mississippi, New Jersey, New York, and Delaware. If Andrei Melnichenko’s plan to invest more than a billion dollars in an ammonia plant is included, the roll of these states includes Louisiana.

Most of these assets are steelmakers or mines supplying the steel industry. They are of marginal profitability, if they aren’t lossmaking. Their contribution to their Russian groups’ total production and to their sales revenues is around 20%, except for pipemaker TMK, controlled by Dmitry Pumpyansky (right). His US and Canadian assets account for about 30%. At least one of the US steelmills, Abramovich’s Evraz Claymont Steel in Delaware, is for sale; so is Igor Zyuzin’s Bluestone coalmine company in West Virginia. If the Russians were to close them all down in a counter-sanction ordered by the Kremlin, the employment impact and the voter reaction across the seventeen states would be significant; the financial impact on the oligarch balance-sheets at home, significantly less.

The US senators arguing for full-scale economic warfare against Russia include John McCain (lower left) and Lindsey Graham (right). In a release on April 28, they declared: “We need to expand sanctions to major Russian banks, energy companies, and sectors of its economy, such as the arms and mining industries, which serve as instruments of Putin’s foreign policy.” McCain faces re-election in 2016; he is trailing in the current polls; and according to the Arizona media, he may be forced into retirement. Graham faces Republican Party opposition in the primary election in June of this year, ahead of the general election in November. There are no major Russian-owned assets in Arizona or South Carolina.

Senator Bob Corker of Tennessee is another Republican Party advocate of economic warfare. “I think these targeted sanctions against individuals just are not affecting Putin’s behaviour enough,” Corker claimed on April 27. “I think we need to put sectoral sanctions in place.” Corker doesn’t go to re-election until 2016. There are no Russian assets in Tennessee.

Senator Carl Levin, a Democrat representing Michigan, has supported these Republicans. He announced last week in Kiev: “The existing authority is sufficient to take very strong sanctioning action against Russian banks that have correspondent accounts in the United States. The authority exists. It should be used, and that includes Gazprom.” Mordashov’s steelmill at Dearborn (once the Ford–owned Rouge Steel Company) is one of the state assets to which Levin is politically sensitive. But he is retiring this year, and won’t be running for election in November. The Democrat and Republican trying to replace Levin are in a close race. So far they are taking no public position on the Ukraine and Russia.

The Kremlin reaction came yesterday from Putin. Concentrating his fire on the US, he threatened to attack US assets and interests if further sanctions were introduced against Russian economic sectors, state banks or Gazprom. “We would very much wish not to resort to any measures in response. But if something like that continues, we will of course have to think about who is working in the key sectors of the Russian economy, including the energy sector, and how.”